What are the implications of the "No Free Lunch" theorem for machine learning?
This is a really common reaction after first encountering the No Free Lunch theorems (NFLs). The one for machine learning is especially unintuitive, because it flies in the face of everything that's discussed in the ML community. That said, the theorem is true, but what it means is open to some debate.

To restate the theorem for people who don't know it, the NFL theorem for machine learning is really a special case of the NFL theorem for local search and optimization. The local search version is easier to understand. The theorem makes the following, somewhat radical claim:


  Averaged across all possible optimization problems, the average solution quality found by any local search algorithm you choose to use is exactly the same as the average solution quality of a local "search" algorithm that just generates possible solutions by sampling uniformly at random from the space of all solutions.


Another formulation, when people want an even stronger reaction, is to say that if you want to find the best solution to a problem, it's just as good to try things that seem to be making your solution iteratively worse as it is to try things that seem to be making your solution iteratively better. On average, both these approaches are equally good. 

Okay, so why is this true? Well, the key is in the details. Wolpert has sometimes described the theorem as a specialization of Hume's work on the problem of induction. The basic statement of the problem of induction is: we have no logical basis for assuming that the future will be like the past. Logically, there's no reason that the laws of physics couldn't all just radically change tomorrow. From a purely logical perspective, it's totally reasonable that the future can be different from the past in any number of ways. Hume's problem is that, in general the future is like the past in a lot of ways. He tried to formulate a philosophical (logical) argument that this needed to be so, but basically failed.

The No Free Lunch theorems say the same thing. If you don't know what your search space looks like, then if you iteratively refine your guess at what a good solution looks like, in response to the observations you've made in the past about what good solutions look like (i.e. learning from data), then it's just as likely that operation you make helps as it is that it hurts. That's why the "averaged over all possible optimization problems" part is key. For any optimization problem where hill climbing is a good strategy after $k$ moves, we can make one that is identical, except that the kth hill climbing move leads to an awful solution. The actual proof is more subtle than that, but that's the basic idea.

A very brief lay summary might be:


  A machine learning algorithim can only be made to work better on some kinds of problems by being made to work worse on another kind of problem.


So what does this mean in a practical sense? It means that you need to have some apriori reason for thinking that your algorithm will be effective on a particular problem. Exactly what a good reason looks like is the subject of vigorous debate within the ML community. This is very closely related to the bias/variance tradeoff.

Some common responses are:


When you're looking at a new optimization problem, although it could have any random kind of structure, the problems we actually encounter in the real world are a lot more regular, and certain common themes are present, like the the fact that moving "uphill" (minimizing error) iteratively tends to lead to good solutions. Basically, this school of thought says NFL is an ornamental theorem: most ML algorithms work better on "the kind of problems we see in real life", by working worse on "the kind of problems we don't see in real life".
When you're looking at a new optimization problem in [insert your favourite application domain], although it could have any random kind of structure,  problems tend to look like [whatever you think], which makes [your favorite algorithm] a lot more effective than random guessing.
Wolpert &amp; McCready themselves published an interesting result showing that there actually are specialized optimization processes, based on co-evolution, that are consistently better than random guessing. 


Regardless, it's indisputable that some algorithms are better than others, in certain sub-domains (we can see this empirically). NFL tells us that to be better there, they need to be worse somewhere else. The question up for debate is whether the "somewhere else" is real problems, or purely artificial ones.